InformationWeek

SAP AG, one of the world's largest software makers with 22,000 employees and $5.1 billion in sales last year, is also remaking itself in a battle to retain market leadership. The Walldorf, Germany, company has embarked on a massive reconstruction project to retool its enterprise resource planning suite--which swept the business world in the '90s--for E-business in the new millennium.

There's one marked difference, however. While once-divided Berlin has emerged as the vibrant new capital city in the post-Cold War era, SAP is no longer the shining star of the software industry. It's burdened by a slowdown in sales, aggressive new competitors, troubled U.S. operations, and slow adoption of new products. With the popularity of ERP software waning and a frenzy for software applications that connect companies to their customers, suppliers, and business partners via the Web, SAP is counting on mySAP.com to create a second wave of success.

MySAP.com is a broad undertaking by SAP to extend R/3, its back-office suite of human-resource, order-management, manufacturing, and accounting applications, to the Web. But a year after its introduction, mySAP.com hasn't caught on in the market as quickly as SAP had hoped. Marquee customers such as Chevron Corp. turned to Ariba Inc. for online procurement applications, and Ford Motor Co. and General Motors Corp. contracted with SAP's rivals Oracle and Commerce One Inc. for online marketplace technology. And the software juggernaut's once-meteoric growth has taken a downturn. SAP profits for the quarter ended in March fell 43% from the previous year. Sales rose only 10%, a sharp contrast to a 40% annualized sales-rate increase for the second half of the 1990s. And SAP executives warn that sales will be slow through 2002 as the company switches gears from multimillion-dollar software deals to incremental transaction-based revenue and joint development projects with its customers.

To help boost the flow of dollars, euros, and deutsche-marks, SAP is reorganizing its software development operation to more effectively attack E-business markets. SAP last week said the remaking of its 5,000-employee-strong development operation will let the company devote teams of developers to adding E-business features and functions to aging versions of the software and focus developers on particular product areas.

In the past at SAP, software developers had moved from application to application, often working part of a day creating new functionality for an upcoming release and the rest of the day fixing bugs in existing products. In the reorganized structure, each developer will be assigned to a particular product area, such as supply-chain management. Within each product area, there will be three levels of developers, each covering one task:

• Developing new features and functions for future releases of R/3 and mySAP.com. These developers will also handle integrating software from other companies into future releases of R/3 and mySAP.com.
• Supporting existing versions of SAP software. These developers also will handle bug fixes, feature enhancements, and integrating software from other companies into existing versions of R/3 and mySAP.com.
• Smoothing the implementation and rollout of SAP applications for new and existing customers. These developers will work on implementation issues specific to a particular customer, as well as provide training and documentation for customers.

"It's a matter of focusing their strategy," says Robert Rubin, former CIO of SAP customer Elf Atochem in Philadelphia, who left the specialty chemical company in April to start an IT consulting business. Rubin says SAP's strategy lately has lacked coherence as the company tried to be all things to all people.

That could be why SAP is trying to simplify its message, which now boils down to this--mySAP.com is real, it's here, and we want to make it easier to adopt. And SAP isn't trying to force the new software down its customers' throats. SAP will help users phase into mySAP.com during an extended maintenance support period that ends August 2003 for R/3 release 3.1I or higher. That covers about 70% of SAP's customer base. Current SAP customers also get a credit for license fees paid for R/3 if they convert to mySAP.com this year.

That's good news for VF Corp. The Greensboro, N.C., apparel maker completed an upgrade to R/3 3.1I in February and is working on the next phase of its project, deployment of R/3 4.5 and SAP's apparel-specific applications in its Vanity Fair lingerie division. VF won't implement mySAP.com until it finishes the 4.5 deployment in October 2001. "We probably should be looking at mySAP, but we have a pretty full plate trying to get these pieces to work together," says VP of IT Carl Shoate.

To entice R/3 customers to move to the newer platform, the company rolled out a mySAP.com Starter Pack, a more inviting wrapper around the suite aimed at easing implementation with preconfigured software, templates, and services. SAP also made available a hosting service for startup companies that promises a live mySAP.com system within as few as five days. "I'm sure mySAP.com will become as mainstream as R/3 was in the early '90s," SAP co-founder and co-chairman Hasso Plattner says.

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